DYADIC INTERNATIONAL INC

Previous wording

*Milestone payments:*At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date, the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements.

Current wording

*Milestone payments:*At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties.

Previous wording

We have granted stock options to employees, directors, and consultants. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options. We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to the CEO (i.e., 5 or 10 years) and certain contractors (i.e., 1 or 3 years). The expected stock price volatility was calculated based on the Company’s own volatility since the DuPont Transaction. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the Company’s business and capital structure.

Current wording

We have granted stock options to employees, directors, and consultants. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options. We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to the CEO (i.e., 5 or 10 years) and certain contractors (i.e., 2 or 5 years). The expected stock price volatility was calculated based on the Company’s own volatility since the DuPont Transaction. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the Company’s business and capital structure.

Previous wording

Three and Six Months Ended June 30, 2024 Compared to the Same Periods in 2023

Current wording

Three and Nine Months Ended September 30, 2024 Compared to the Same Periods in 2023

Previous wording

The following table summarizes the Company’s revenue and cost of research and development revenue for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes the Company’s revenue and cost of research and development revenue for the three and nine months ended September 30, 2024 and 2023:

Previous wording

For the three and six months ended June 30, 2024, the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023. For the three months ended June 30, 2024, the Company’s revenue was generated from ten collaborations compared to eight collaborations for the same period a year ago. For thesix months ended June 30, 2024, the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023. For thesix months ended June 30, 2024, the Company’s revenue was generated from thirteen collaborations compared to eight collaborations for the same period a year ago.

Current wording

For the three months ended September 30, 2024, the increase in research and development revenue and cost of research and development revenue was due to the increasing numbers of collaborations conducted in 2024. The Company’s revenue was generated from eleven collaborations compared to seven collaborations for the same period a year ago. For thenine months ended September 30, 2024, the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023. For thenine months ended September 30, 2024, the Company’s revenue was generated from nineteen collaborations compared to twenty collaborations for the same period a year ago.

Previous wording

The license revenue for the three and six months ended June 30, 2023, was related to the Janssen license agreement, which was completed in December 2023.

Current wording

The license revenue for the three and nine months ended September 30, 2024, was related to the licensing fee from the Proliant agreement of $1.0 million, and a success fee payment from the Inzyme agreement of $425,000. The license revenue for the three and nine months ended September 30, 2023, was related to the Janssen license agreement, which was completed in December 2023.

Previous wording

Research and development expenses for thethree months ended June 30, 2024, decreased to $516,000 compared to $918,000 for the same period a year ago. The decrease reflected the winding down of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate as patient dosing was completed in February 2023 and a decrease in the amount of ongoing internal research projects.

Current wording

Research and development expenses for thethree months ended September 30, 2024, decreased to $460,000 compared to $716,000 for the same period a year ago. The decrease reflected the winding down of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate as patient dosing was completed in February 2023, and a decrease in the amount of ongoing internal research projects.

Previous wording

Research and development expenses for thesix months ended June 30, 2024, decreased to $1,038,000 compared to $1,728,000 for the same period a year ago. The decrease reflected the winding down of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate as patient dosing was completed in February 2023 and a decrease in the amount of ongoing internal research projects.

Current wording

Research and development expenses for thenine months ended September 30, 2024, decreased to $1,499,000 compared to $2,444,000 for the same period a year ago. The decrease reflected the winding down of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate as patient dosing was completed in February 2023 and a decrease in the amount of ongoing internal research projects.

Previous wording

General and administrative expenses for the three months ended June 30, 2024, increased by 14.6% to $1,608,000 compared to $1,403,000 for the same period a year ago. The increase reflected increases in share-based compensation expenses of $84,000, legal expenses of $81,000, business development and investor relations expenses of $60,000, and other increases of $22,000, offset by decreases in management incentives of $36,000, and insurance expenses of $6,000.

Current wording

General and administrative expenses for the three months ended September 30, 2024, increased by 1.2% to $1,298,000 compared to $1,282,000 for the same period a year ago. The increase reflected increases in business development and investor relations expenses of $52,000, and other increases of $24,000, offset by decreases in management incentives of $38,000, and accounting and legal expenses of $22,000.

Previous wording

General and administrative expenses for thesix months ended June 30, 2024, increased by 17.8% to $3,396,000 compared to $2,883,000 for the same period a year ago. The increase reflected increases in business development and investor relations expenses of $296,000, share-based compensation expenses of $87,000, legal expenses of $64,000, management incentives of $19,000, and other increases of $82,000, offset by decrease in insurance expenses of $35,000.

Current wording

General and administrative expenses for thenine months ended September 30, 2024, increased by 12.7% to $4,694,000 compared to $4,165,000 for the same period a year ago. The increase reflected increases in business development and investor relations expenses of $241,000, share-based compensation expenses of $90,000, accounting expenses of $82,000, legal expenses of $63,000, and other increases of $92,000, offset by decrease in insurance expenses of $39,000.

Previous wording

Loss from operations for the three months ended June 30, 2024, decreased to $2,043,000, compared to $ 2,290,000 for the same period a year ago. The decrease in loss from operations was due to a decrease in research and development expenses of $402,000, partially offset by an increase in general and administrative expenses of $205,000.

Current wording

Loss from operations for the three months ended September 30, 2024, decreased to $ 203,000 compared to $ 1,720,000 for the same period a year ago. The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme.

Previous wording

Loss from operations for the six months ended June 30, 2024, decreased to $ 4,168,000, compared to $ 4,341,000 for the same period a year ago. The decrease in loss from operations was due to a decrease in research and development expenses of $690,000, partially offset by an increase in general and administrative expenses of $514,000.

Current wording

Loss from operations for the nine months ended September 30, 2024, decreased to $ 4,371,000, compared to $ 6,061,000 for the same period a year ago. The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme.

Previous wording

For the three months ended June 30, 2024, total other income (expenses), net, was an expense of $3,000 compared to an income of $137,000 for the same period a year ago. The decrease in other income was due to interest expenses related to the Convertible Notes in 2024.

Current wording

For the three months ended September 30, 2024, total other income (expenses), net, was an expense of $1,000 compared to an income of $106,000 for the same period a year ago. The decrease in other income was due to interest expenses related to the Convertible Notes in 2024.

Previous wording

For thesix months ended June 30, 2024, total other income (expenses), net, was $113,000 compared to $1,232,000 for the same period a year ago. The decrease in other income was due to the gain on sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023, and interest expenses related to the Convertible Notes in 2024.

Current wording

For thenine months ended September 30, 2024, total other income (expenses), net, was $112,000 compared to $1,337,000 for the same period a year ago. The decrease in other income was largely due to the gain on sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023, and interest expenses of $302,000 related to the Convertible Notes in 2024.

Previous wording

Net loss for the three months ended June 30, 2024, was $2,045,000 compared to $2,153,000 for the same period a year ago. The decrease in net loss was due to a decrease in research and development expenses of $402,000, partially offset by increases in general and administrative expenses of $205,000 and interest expenses of $141,000 in 2024.

Current wording

Net loss for the three months ended September 30, 2024, was $203,000 compared to $1,614,000 for the same period a year ago. The decrease in net loss was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme recognized in the third quarter 2024, in addition to increase in research and development revenue of $180,000, partially offset by interest expense, net of interest income of $107,000.

Previous wording

Net loss for the six months ended June 30, 2024, was $4,055,000 compared to $3,109,000 for the same period a year ago. The decrease in net loss was due to a decrease in the gain on sale of the Company’s equity interest in Alphazyme LLC of $957,000 and research and development expenses of $690,000, partially offset by increases in general and administrative expenses of $514,000 and interest expenses of $174,000.

Current wording

Net loss for thenine months ended September 30, 2024, was $4,258,000 compared to $4,724,000 for the same period a year ago. The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme recognized in the third quarter of 2024, offset by the gain on sale of the Company’s equity interest in Alphazyme LLC of $1,018,000 in 2023 and decrease in research and development expenses of $946,000, partially offset by increases in general and administrative expenses of $529,000 and interest expenses of $302,000.

Previous wording

On March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 (the “Convertible Notes”) in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The purchasers of the Convertible Notes include immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Company’s outstanding common stock, (collectively, the “Purchasers”). The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, is $5,824,000. The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes. This private placement funding is expected to support our near-term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non-pharmaceutical applications.

Current wording

On March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 (the “Convertible Notes”) in a private placement. The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Company’s outstanding common stock, (collectively, the “Purchasers”). The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, were $5,824,000. The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes. This private placement funding is expected to support our near-term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non-pharmaceutical applications.

Previous wording

The Convertible Notes can be converted into shares of Dyadic’s Class A common stock (the “Common Stock”), at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date. The conversion price is $1.79 per share of the Common Stock, which is equal to 125% of the trailing 30-day VWAP of the Common Stock ending on the trading day immediately preceding the date of the securities purchase agreement. As of June 30, 2024, $400,000 of the Convertible Notes were converted into 223.463 shares of Common Stock. For more information regarding the Convertible Notes, see Note 4 to the Consolidated Financial Statements.

Current wording

The Convertible Notes can be converted into shares of Dyadic’s Class A common stock (the “Common Stock”), at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date. On October 4, 2024, the Company entered into an amendment (the “Amendment”) to the Convertible Notes. Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s common stock is $1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the 26, 29 and 32-month anniversaries of the original issue date of the Convertible Notes.

Previous wording

As of June 30, 2024, cash and cash equivalents were$6.1 million compared to$6.5 million as of December 31, 2023. The carrying value of investment grade securities, including accrued interest as of June 30, 2024, was$4.0 million compared to$0.8 million as of December 31, 2023.

Current wording

As of September 30, 2024, cash and cash equivalents were$5.9 million compared to$6.5 million as of December 31, 2023. The carrying value of investment grade securities, including accrued interest as of September 30, 2024, was$4.0 million compared to$0.8 million as of December 31, 2023.

Previous wording

Net cash used in operating activities for thesix months ended June 30, 2024 was $3.1 million, which was principally attributable to a net loss of $4.0 million, partially offset by changes in operating assets and liabilities of $0.4 million and share-based compensation expenses of $0.6 million.

Current wording

Net cash used in operating activities for thenine months ended September 30, 2024 was $3.3 million, which was principally attributable to a net loss of $4.3 million, partially offset by changes in operating assets and liabilities of $0.2 million and share-based compensation expenses of $0.9 million.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2023, was$3.8 million, which was principally attributable to a net loss of $3.1 million, gain from the sale of investment in Alphazyme, LLC of approximately $1.0 million, and changes in operating assets and liabilities of $0.4 million, partially offset by share-based compensation expenses of approximately $0.7 million.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2023, of approximately $5.8 million was principally attributable to a net loss of approximately $4.7 million, gain from the sale of investment in Alphazyme, LLC of approximately $1.0 million, and changes in operating assets and liabilities of approximately $1.0 million, partially offset by share-based compensation expenses of approximately $0.9 million.

Previous wording

Net cash used in investing activities for thesix months ended June 30, 2024 was $3.1 million, compared to a net cash provided by investing activities of $3.8 for the six months ended June 30, 2023. The increase in net cash used in investing activities was attributable to additional purchases of investment securities of $2.7 million, decreases in proceeds received from maturities of investment securities of $3.1 million, and proceeds from the sale of investment in Alphazyme of $1.3 million.

Current wording

Net cash used in investing activities for thenine months ended September 30, 2024 was $3.1 million, compared to a net cash provided by investing activities of $7.4 million for the nine months ended September 30, 2023. The decrease in net cash used in investing activities was attributable to additional purchases of investment securities of $3.7 million, decreases in proceeds received from maturities of investment securities of $5.6 million, and proceeds from the sale of investment in Alphazyme of $1.3 million.

Previous wording

Net cash provided by financing activitiesfor thesix months ended June 30, 2024 was $5.8 million, which was related to net proceeds from issuance of convertible notes. For thesix months ended June 30, 2023, there were no cash flows from financing activities.

Current wording

Net cash provided by financing activitiesfor thenine months ended September 30, 2024 was $5.8 million, which was related to net proceeds from issuance of convertible notes. For thenine months ended September 30, 2023, there were no cash flows from financing activities.